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Balancing the carbon budget

As the talks heat up in Copenhagen, Pan Jiahua, Chen Ying and Li Chenxi argue that formulating emissions targets will require an overhaul of the current climate regime.

United Nations climate-change talks are underway in Copenhagen, but significant differences remain between participants – and continue to cast a shadow over the proceedings – notably on the issues of emissions targets and funding. Therefore, we should ask ourselves if, in fact, global climate mechanisms require fundamental reform. How can we fairly allocate the world’s limited emissions budget, both protecting the environment and ensuring that everyone’s basic development needs are met?

The Chinese Academy of Social Sciences’ Research Centre for Sustainable Development (the authors of this article are members) unveiled their Carbon Budget Proposal (CBP) at climate negotiations last year in Poznan, Poland. The research centre has since explored related international mechanisms, including those for balancing and financing carbon budgets, as well as issues of markets and compliance. The aim has been to put the principle of justice into the CBP.

The CBP assumes that global emissions will peak by 2020, with a fall of 50% on 2005 levels by 2050. Using 2005 population levels as a benchmark, it calculates a carbon budget of 2.33 tonnes of CO2 per person per year from 1900 to 2050.

Starting from the principle of equality of average accumulated emissions, this budget fairly apportions carbon between the nations of the world – that is, the initial carbon budget allocation will be in direct proportion to the population in the base year.

If a carbon budget for 1900 to 2050 were allocated to each country, initial calculations show that most Annex I (industrialised) nations are already heavily in arrears, on average by a factor of two. Some countries are more overdrawn: the United Kingdom by 2.7 times, the United States by 3.2 times. A small number of non-Annex I (developing) nations, such as oil exporters, also run a carbon deficit, but to a lesser degree.

The majority of non-Annex I nations enjoy a surplus in their carbon budget: for example, China has to date used 28% of its carbon budget, India only 10%. A few Annex I countries, such as Turkey and Spain, also have a small surplus.

Overall, the overdrawn nations have a total carbon deficit of 509.82 billion tonnes of carbon dioxide, compared with a 986.95 billion-tonne surplus for those nations under their allowance. A binding carbon budget would need a mechanism to deal with these imbalances in carbon emissions, a budget balancing process that would require three stages.

First, the system would need to allow domestic transfers to repay historical carbon arrears. Countries with historical arrears would offset that debt with future carbon budgets. This would allow some nations, such as Italy and Romania, to balance their historical carbon budgets.

Second, international carbon budget transfers could be used to repay historical arrears. Nations unable to pay off historical arrears during the first stage would need carbon budget transfers from the surplus of non-Annex I nations. This would involve the transfer of around 389.07 billion tonnes of carbon dioxide.

Third, international carbon budget transfers would be used to meet basic needs. Nations left without an adequate carbon budget to meet their basic needs would need carbon budget transfers from the surplus of non-Annex I nations. This would involve the transfer of around 120.75 billion tonnes of carbon dioxide.

These three stages would see each nation balance its carbon budget and historical emissions – and obtain the carbon allocation it needs for the future. The carbon budget allocation ratio between Annex I and non-Annex I nations will change significantly, from 19.5:80.5, to 40.9:59.1.

Developed nations still would have annual per capita emissions above the standard 2.33 tonnes of carbon dioxide: 7.63 tonnes for the United States, 6.74 tonnes in the UK, 6.59 tons in Germany and 5.43 tons in Canada. Meanwhile, the developing nations supplying carbon allocations would have an annual per capita average of only 1.61 tonnes. The large historical emissions of industrialised nations have infringed on the ability of developing countries to emit as much carbon dioxide in the course of their development.

Funding is also a crucial issue in the current negotiations. Poor nations propose that rich countries transfer around 0.5% to 1.5% of GDP to support responses to climate change in the developing world – but there has not yet been a positive response to this proposal.

The CBP suggests that international carbon budget transfers would become the basis for financing, with the cost of transfers varying across different periods of time. As humanity’s awareness of climate change alters, so should the price of carbon.

During the first stage, from 1900 to 1989, climate change was not an issue in international politics – although historical emissions still have an impact. The emitters were unaware of the harm they would cause, but the damage done cannot be entirely ignored. So a low price should be set, to be paid voluntarily. If we assume US$5 per tonne of carbon dioxide, then these carbon budget transfers would be worth around US$1.5721 trillion.

The second stage runs from 1990 to 2004, when climate change became a global issue. As international law made clear that greenhouse gases were harmful, a high and compulsory price should be set: assuming the current Certified Emission Reduction (CER) average of US$10 per tonne of carbon, these carbon budget transfers would be worth around USD 1.0705 trillion.

During the third period, from 2005 to 2050, carbon budget transfers would be made to ensure basic needs were met – so a low, but compulsory, price will be set. Assuming US$5 per tonne of carbon dioxide, these carbon budget transfers would be worth around US$607.16 billion.

In total, this financial mechanism would raise an estimated US$4.1498 trillion.

The balancing and financial mechanisms of the carbon budget affect the overall interests of developing nations, and should be resolved through international political negotiations, rather than a distributed market mechanism. Arrangements for the management, allocation and use of the funds would need to be determined through international political negotiations.

According to the CBP, each nation has a duty to keep its emissions within its budget – an approach compatible with existing emission quotas and trading mechanisms. If actual emissions are above the quota, emissions rights can be purchased on international markets. Nations which produce a carbon surplus can profit by selling those emission rights.

Currently the CBP considers implementation up to 2050, but actual implementation would need to be in stages. Nations would provide national allocation plans for commitment periods (of one decade, for example), both to ensure that buying nations achieve their commitments for the period, and that selling nations do not oversell. Initial calculations show that the CBP would require an international carbon market worth nearly US$50 billion.

Ensuring that the implementation of carbon budgets and trading is measurable, reportable and verifiable will require further mechanisms. For example, each nation might establish a carbon account showing its carbon budget, the use of that budget, purchases, sales and reserves. These accounts would be clear and transparent, and there would be regular analysis and evaluation of compliance and the international transfer of funds and technology.

Compliance mechanisms will be required for nations who fail to implement their legal obligations under international agreements. These are an important part of international climate-change mechanisms. The CBP includes both incentives and penalty mechanisms. The penalty mechanism would use a progressive carbon tax to increase the financial burden on nations that exceed emission quotas, and also deduct the excess emissions from the next commitment period’s carbon budget. The actual tax rate and the collection, management and use of the funds raised all need to be determined through international political negotiations.

Overall, the CBP uses a mechanism design to expound on the operation of a just and sustainable international climate-change mechanism. Based on a fair initial allocation of carbon budgets, it solves the issue of the historical arrears of developed nations and provides a number of methods by which they can meet future needs, and also provides a new route to raising the funds needed to deal with climate change while ensuring the global climate budget remains balanced.

The CBP has gradually become a consensus among Chinese academics, and has received a positive international reception. The German Advisory Council on Global Change has proposed its own version, known as the carbon budget approach. The proposal is an important step towards revolutionising the post-Copenhagen climate regime.

Plus – the chinadialogue team are reporting every day from the climate talks in Copenhagen on our unique, bilingual blog: “the daily planet”.

Pan Jiahua is executive director of the Centre for Urban Development and Environment at the Chinese Academy of Social Sciences.

Chen Ying is affiliated with the Centre for Urban Development and Environment at the Chinese Academy of Social Sciences.

Li Chenxi is a post-graduate student of the economics of sustainable development at the Chinese Academy of Social Sciences.

评论 comments

CPB有用吗？

Is CPB a way-out?

The german carbon budget proposal was 750 millions $ . But tell me please what would be the obligations of China in this calculation? It is not clear. And why if your reasonning sounds good isn'it welcomed in Copenhagen to seal the deal? Don't you think it is a way of coming out of the Kyoto Protocol?

I am suspicious of such researches

What effect will be gained through such researches？What is your premise on this research? Can this premise be satisfied? US, Japan, and Europe will ignore it. What on earth is the use of this research？It is impossible to ask developed nations to pay the debts. They won't do anything without obligation. They are farsighted and have a stong sense of risk. The most important thing is that China should first of all, mind its own business, to improve its domestic environment, thus will benefit the global issue. The only function of this research is to express that we should not ignore our debts. But it's unlikyly to compensate the debts.

从贫穷到贫穷的国际转移

International transfers from the poor to the poor

The authors imlicitly demand that the poor in so called "developed" countries subsidise the lifestyles of middle class and wealthy in "developing" countries.

The per capita emissions of the wealthy and the middle class in China are presumably already above or at the maximum proposed by the authors.

How likely is it that China would equitably transfer to the poor in China the international transfers which the authors recommend be made to China as a nation?

匿名 | Anonymous
16:2015.12.2009

转让机制不是解决之道

复杂的转让机制（极可能发生“泄漏”问题）虽然是那些（和他们的先人）造成当前大气和海洋二氧化碳水平承担责任、减少排放好方法。

双赢的局面需要美国人和欧洲人减少消费。这样一来，不管在哪儿制造或增长的碳排放都将有所下降。

Transfer mechanisms are not the answer

Rather than rely on complex transfer mechansims (with major opportunities for "leakage"), surely it would be better for those who (with their predecessors) are responsible for the current level of CO2 in the atmosphere and oceans to reduce their emissions.

A win-win situation would be that the average person in the USA and EU consumes less and in so doing causes a reduction in carbon emissions wherever the products they would otherwise have consumed would have been made or been grown.

转移必须足够大到能够改变我们的行为习惯

The transfers should be large enough to change behaviour

To be worthwhile, the transfers would have to be large enough to choke off the sort of economic growth in donor countries which is causing climate change.

It would also be worthwhile if the size if the transfers forced donors to reduce their defence expenditure, particularly if this were matched by comparable cuts in recipient countries' defence budgets.

匿名 | Anonymous
16:4718.12.2009

很妙的建议

A great suggestion

This kind of approach can not only fairly clarify each country's responsibility for carbon emission reduction from a historical perspective, but can reduce global emissions by one half by 2050. I believe this is a suggestion that all developing countries can accept, including the island countries who are most affected. In theory, it's a good, fair innovation, but it's almost certain that developed countries won't accept it. Therefore, we must think of a way to create an international mechanism or something we can do to force developed countries to accept it.

匿名 | Anonymous
03:0227.12.2009

LS的真搞笑

comment #6 (upstairs) is really funny.

The budget on carbon discharge still requires further discussion. The present international negotiation has reached an agreement neither for a future blueprint nor for details. I agree with the second comment. It is very keen for China to understand where all efforts are going to be concentrate-- none of the big global issues can be decided by a single country. It is absolutely impossible for China to set rules for the whole world or to force others to accept them.

匿名 | Anonymous
03:1812.01.2010

本人的看法

西方人早年排放的时候不知道会有今天的后果。而我们现在知道，就抓紧做自己的事吧。尤其是我们现在应该把最主要的精力放在减少污染上。

My opinion

Westerns countries do not realize what consequences emissions might bring today when they polluted many years ago. Since we have realized the consequences of green house gas emission and we are doing the same thing now, we should do something immediately, especially focusing our efforts on pollution reduction.